Time for Union to seize the day on world trade issues

AS SUGGESTED in Oxfam’s swimming pool stunt, a picture of which accompanied the recent article in European Voice by the charity’s president Mary Robinson (Opinion, 9-15 October), the EU has been blamed, sometimes alongside the US, for being inflexible in protecting its narrow interests and so being responsible for the Cancún debacle which has stopped the Doha Development Round in its tracks.

A very different picture was given by European Trade Commissioner Pascal Lamy in his speech to the European Parliament on 24 September, when he argued that the EU was “famously keen” to see the meeting succeed and had made more concessions on agriculture and other issues than any other party, in comparison with the “total immobilism of the other big players”.

The truth is that the EU did want to make a success of the round, and was willing to make concessions, especially on the key topic of agriculture. Most importantly, it indicated it was ready to eliminate exports subsidies on products of interest to developing countries. The offer could reasonably be interpreted as one to remove export subsidies on the most important commodities, such as cereals and sugar. Also on the table were substantial cuts, averaging 36%, in import tariffs.

But the EU must not be content to say that it has done its best, then sit back and do nothing – if it wants to become a force in the world and stand by its claimed support for multilateralism, it must take the initiative.

For outside commentators and perhaps the participants, the WTO negotiations look like 146 participants entering a labyrinth and hoping to meet at the centre. That the major issues were never properly discussed is hardly surprising. Earlier rounds succeeded because the large developed countries were, for the most part, able to set the agenda. This does not mean the world trade scene is entirely stacked against developing countries. However, the present regime has severe flaws, especially in agriculture, which adversely affect developing countries and need to be addressed.

If negotiations between a large number of participants are to succeed, it would be helpful to reduce the agenda. The EU could help in two ways.

That agricultural export subsidies are harmful to farmers in developing countries, as they reduce both prices and market opportunities, is now widely admitted. If they are wrong, they should be removed. When a burglar admits that he has stolen from other people’s property, he tries to plead that he will lead a reformed life by refraining altogether from burglary. He does not offer to stop only if others do the same, nor does he say he is prepared to reduce the amount that he steals by 45% or refrain altogether from stealing certain items.

The EU should therefore simply announce it will remove all export subsidies within a short period, without asking for anything in return. As 75% of export subsidies have already been removed compared with the situation ten years ago, and as domestic trade-distorting subsidies are being replaced by other forms of income support, the cost, whether to the EU budget or to farmers’ incomes of removing the subsidies, would be modest.

Secondly, the new ‘Singapore issues’ (calls by the EU for rules on investment, competition, public procurement and trade facilitation) have overloaded the agenda. The offer made at the end of the Cancún summit, to take them all off the table, except matters concerning transparency of public procurement and trade facilitation, should remain. It is arguable that rules of this kind may be beneficial for developing countries’ economies but if so this should be given as advice, not as part of negotiations.

An attempt to establish rules for investment, competition and open access to public procurement is an attempt to do for the world what the EU has done, with varying degrees of success, for itself over the last 46 years: it is several bridges too far. These two moves would do a lot to re-establish trust and goodwill. That said, there will still be a lot of difficult negotiations: both the EU and the more developed of the developing countries must increase access to their respective markets.

Charles Jenkins is director, western Europe, at the Economist Intelligence Unit.